After the death of their mother, two children in Liverpool run away from home to escape their cruel uncle who treats them harshly. They flee to Ireland in hopes of finding love and safety with their kindly grandmother. However, their uncle is a failed actor who is a master of disguise. He uses his skill to pursue them in hopes of finding them for his own financial gain. The children must rely on their wits and the kindness of strangers to stay ahead of him or their lives will be in mortal jeopardy.

Young Jimmy is being pursued by the evil Wilhemina W. Witchiepoo. More specifically, Witchiepoo is after Jimmy's small friend, a small solid gold diamond encrusted talking flute named Freddy. Witchiepoo knows that if she has Freddy in her possession, she will definitely be named Witch of the Year at the upcoming witch's convention. In Witchiepoo's pursuit of them, Jimmy and Freddy escape to Living Island, where Witchiepoo's wicked castle is located. But Living Island is also a fantastical land of among other things talking animals, talking trees and talking winds. The mayor of Living Island is H.R. Pufnstuf, a talking dragon. Pufnstuf and his friends do whatever they need to to protect Jimmy and Freddy from Witchiepoo's evil grip. Pufnstuf and his friends have to get Jimmy and Freddy off the island to their ultimate safety. In the end, Jimmy may have to save Pufnstuf and all the good guys...